Forbearances drop as extensions provide a ‘smooth transition’

Independent mortgage banker recovery drove the weekly decrease in forbearance share, according to the Mortgage Bankers Association.

The number of mortgages in coronavirus-related forbearance followed two weeks of declines by dropping another 7 basis points between Feb. 8 and Feb. 14.

Home loans in forbearance plans represent 5.22% — about 2.6 million homeowners — of all outstanding mortgages, down from 5.29% the week before. It marks the lowest forbearance rate since hitting 3.74% on the week ending April 5. The share of forborne loans at independent mortgage bank servicers dropped to 5.54% from 5.69%, while depositories rose to 5.28% from 5.26%.

“Policymakers and the mortgage industry have helped enable this [strong housing market] during the pandemic by providing millions of homeowners support in the form of forbearance,” MBA’s SVP and chief economist Mike Fratantoni, said in a press release. “The decision to extend the allowable duration of forbearance plans should provide for a smoother transition this year as the job market continues to recover.”

In the last two weeks,both President Biden and the Federal Housing Finance Agency pushed out the forbearance request deadlines by three months to June 30. While the extended forbearance protections are intended to assist troubled borrowers, the latest Black Knight report asserts that they’ll likely stymy the recovery rate.

Ginnie Mae loans in forbearance — Federal Housing Administration, Department of Veterans Affairs and U.S. Department of Agriculture Rural Housing Service products — dipped to 7.32% from 7.34%.

Conforming mortgages — those purchased by Fannie Mae and Freddie Mac — continue to be the healthiest loan type, going to 2.97% from 3.01%. Meanwhile, private-label securities and portfolio loans — products not addressed by the coronavirus relief act — dropped to 8.76% from 8.89%.

An 15.9% share of all forborne mortgages sit in the initial forbearance stage, while 81.6% shifted to extended plans. The remaining 2.5% re-entered forbearance after exiting previously.

Forbearance requests as a percentage of servicing portfolio volume dipped to 0.06% from 0.07% the week earlier. Call center volume as a percentage of portfolio volume increased slightly to 9.3% from 9.2%.

The MBA's sample for this week's survey includes a total of 48 servicers with 25 independent mortgage bankers and 21 depositories. The sample also included two subservicers. By unit count, the respondents represented about 74%, or 37.1 million, of outstanding first-lien mortgages.